Working at a tender age is an American tradition. What isn’t so traditional is the notion of kids contributing to their own IRA, especially a Roth IRA. But it should be a tradition, because it’s a really good idea.
Here’s what you need to know about IRAs for kids. Let’s start with the Roth IRA option.
Roth IRA Contribution Basics
The only federal-income-tax-law requirement for a child to make an annual Roth IRA contribution is to have enough earned income during the year to cover the contribution. Age is completely irrelevant.
So if a child earns some cash from a summer job or part-time work after school, he or she is entitled to make a Roth contribution for that year.
For both the 2021 and 2022 tax years, your working child can contribute the lesser of
While the same $6,000 contribution limit applies equally to Roth IRAs and traditional IRAs, the Roth option is usually better for kids.
Key point. A contribution for your child’s 2021 tax year can be made as late as April 15, 2022. So, there’s still time for that.
Modest Contributions to Child’s Roth IRA Can Amount to Big Bucks by Retirement Age
By making Roth contributions for a few years during the teenage years your kid can potentially accumulate quite a bit of money by retirement age.
But realistically, most kids won’t be willing to contribute the $6,000 annual maximum even when they have enough earnings to do so.
Say the child contributes $2,500 at the end of each of the four years. Assuming a 5 percent return, the Roth account would be worth about $82,000 in 45 years. Assuming an 8 percent return, the account value jumps to a whopping $259,000. Wow!
You get the idea. With relatively modest annual contributions for just a few years, Roth IRAs can be worth eye-popping amounts by the time your “kid” approaches retirement age.
If you would like to discuss earned income and IRS options for your child, please call me on my direct line at (757) 410-8030
Opening the mailbox and finding a letter from the IRS is frightening, but what happens next can be even scarier. The tax agency wields incredible power, and if they claim you owe additional taxes they have many different options for forcing you to pay.
When the IRS claims you owe additional money, they will act quickly, and that could leave you reeling, and trying hard to preserve the money you need to pay your bills, feed your family and keep a roof over your head. If you are employed, the IRS can reach into your paycheck, forcing the company you work for to withhold part of what you are owed until the tax debt has been satisfied.
The IRS can also hold onto any refunds and government payments you would otherwise be due. If you have been waiting for that big fat refund check to arrive, you could be waiting a long time if you owe money to the IRS.
As if all this were not frightening enough, the tax agency also has the power to levy your bank accounts, including the accounts you need to run your business and your life. Those bank account freezes could leave you without the cash you need, putting you in a real bind and forcing you to pay back what you owe.
Your home could even be at risk if you owe money to the IRS. The tax agency could, for instance, apply for a lien against not only your primary residence but any other real estate you own. The threat of this kind of action has compelled many taxpayers to cough up the money the agency says they owe, even if they think the IRS is wrong.
As you can see, the IRS has wide latitude and plenty of power, and the tax agency is often unwilling to settle for less than the government says you owe. If you disagree with the amount the IRS is asking for, or if you simply do not have the money to pay the bill, you need to act fast. Ignoring the problem will only make it worse, and you cannot simply pretend that you never pulled that fateful envelope out of your home mailbox.
If you are on the wrong end of a compliance action by the IRS, you cannot afford to leave anything to chance, and you certainly should not try to fight back on your own. The tax code is complex, and far more pages than the Bible, and like that holy book, many of the terms are arcane and difficult to understand.
When fighting the IRS, you need the help of a professional, and that is where a tax resolution export comes into play. By working with a professional you can fight back on an even playing ground, and the money you save could be worth far more than the fee you pay.
Our firm specializes in tax resolution and helping people who owe the IRS or state $10,000 or more. We’ve seen taxpayers get blindsided every year by a huge tax bill and often falling behind on their taxes for years on end. If that’s you, we can help. Contact our firm today to discuss your tax debt settlement options [https://calendly.com/premiersmlbus/consult]
Given how high the stakes are, it is surprising how little thought many people give to their taxes. All too often, individuals simply walk into a neighborhood storefront, hand over their most personal information, and trust the person on the other side of the desk to do the right thing and prepare their taxes properly.
In many cases, that trust is well placed, and the individual preparing the taxes is indeed the honest and trustworthy professional they claim to be. In other cases, however, the trust is misplaced, and the tax preparer will end up making mistakes that could cost the individual a great deal. If an audit is triggered by deliberate misrepresentation or unintentional mistake, you will still be on the hook for any additional taxes, interest, and penalties.
If you’re in tax trouble because you trusted the wrong tax preparer, then you will need a qualified tax resolution firm to help you resolve your tax problem. However, you don’t want to repeat the same mistake twice! So it is important to do your homework and know what to look for in a tax resolution firm. Here are 4 quick tips to help you find a qualified tax resolution firm.
#1 Read Their Reviews Online
By reading online reviews you can quickly see if the tax resolution firm is reputable and stands by its clients. A lot of the big national firms will have terrible reviews but they market themselves heavily, so consumers don’t think twice about their reputation. If you owe back taxes, waiting can cost you a lot of money and if the tax resolution firm disappears on you or doesn’t return your call, that wasted time could cost you dearly. This can easily be snuffed out by seeing if they have good online reviews about their services.
#2 Make Sure the Tax Resolution Firm Has Experience and A Proven Track Record
Negotiating with the IRS to settle your tax debt is a specialized skill that not all tax attorneys or tax professionals have. It’s important to ask about their recent case settlements and success stories. A true tax resolution professional will have proof they’ve done this before and successfully helped resolve back tax problems.
#3 What Does Their Communication Look Like Once You Sign-On?
A professional and experienced firm will have systems in place to make sure you’re updated regularly on your tax resolution case. The IRS moves slow and there will likely be big gaps in time in between updates from the IRS. That doesn’t mean the tax relief firm should also have communication gaps. Ask how long they think it’ll take to resolve your tax problem, and how you’ll be updated even if they don’t have any news from the IRS.
#4 Avoid Big National Firms With Salespeople Who Promise The Moon But Don’t Deliver
You’ve heard their ads on the radio or TV. If you call a big national firm you’ll likely get a salesperson who knows very little about taxes or how to settle your tax debt. Not every taxpayer qualifies for all the IRS tax debt settlement programs. However, these salespeople will promise you the moon but will fail to deliver because they didn’t take the time to understand your specific situation and they’re not licensed tax resolution professionals. Make sure to ask who will be responsible for your case and try to speak with them directly before signing up. A true tax resolution expert will be happy to speak with you to make sure they can understand your case and offer you the right solution.
Need Tax Relief?
If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem. https://calendly.com/premiersmlbus/consult
It is one of the scariest things that can befall a taxpayer – the dreaded notice from the IRS stating you owe them more money you can’t pay. When you open up the mailbox and see the return address of the tax agency staring back at you, your heart is bound to skip a beat (or two).
Few people look forward to communicating with the IRS, but plenty of taxpayers receive these notices every year. If you do find yourself on the receiving end of such a notice, knowing what to do next could make all the difference, and possibly save your bank account. Here are seven critical steps to take if the IRS disagrees with the income (or expense) figures you have reported.
Note: If you fall behind on filing your taxes, you’re not alone and we can help. Reach out to our tax resolution firm and we’ll help you file late tax returns and negotiate with the IRS if you owe back taxes. https://calendly.com/premiersmlbus/consult
If you do need to contact the IRS, keep in mind that their phone lines are extremely busy. Many people who have been through this trauma recommend calling early in the morning, right after the phone lines open, so you can get in line and get your questions answer before the lines fill up.
We NEVER suggest our clients try to contact the IRS on their own. It would be like going to court without a lawyer. The IRS is not your friend, they’re sole responsibility in these cases is to collect taxes they think they’re owed.
Hopefully you will never be on the receiving end of a nasty letter from the IRS but it is still important to be prepared. If you do find a letter from the IRS in your mailbox, following the seven critical steps listed above could save you from further trouble.
Reach out to our tax resolution firm and we’ll schedule a free, no-obligation confidential consultation to explain your options in full to permanently resolve your tax problem. https://calendly.com/premiersmlbus/consult
Whether you are expecting a nice tax refund or preparing to write a big scary check, you know that April 15 is the annual tax filing deadline. What you may not know, however, is that tax day is every day at the IRS, and the tax agency is always reviewing the information taxpayers and business owners have provided.
That means that keeping tax records is about more than just smart bookkeeping – it is an integral form of self protection. You see, millions of Americans get letters from the IRS stating they owe back taxes or requesting more information about their tax returns.
It may be disconcerting, but the IRS has the right to request additional information months, or even years, after the return you filed has supposedly been processed and accepted. In fact, the much feared tax agency can request additional documentation for up to three years after the annual tax deadline has come and gone.
We help people resolve their back tax problems and often settle with the IRS for less than the amount they owe, but in order to do this, we need to provide the right records. Thats where having your tax records saved can be the difference between settling your tax debt or not.
As a result, it is important to retain your tax records and keep certain tax documents on hand, just in case the IRS asks for them. Here are the most common tax records and how long you should keep them around.
If you owe back taxes, our firm can help negotiate with the IRS and potentially settle your tax debt. Call us today. Our tax resolution specialists can navigate the IRS maze so that you have nothing to worry about. [https://calendly.com/premiersmlbus/consult]
In most cases the IRS will have up to three years to question the figures you reported on your tax return, or otherwise challenge the information you provided. You may think the tax year is over, but for the IRS the final curtain does not fall for a full 36 months.
For this reason, it is generally a good idea to keep your old tax returns for a minimum of three years. You do not necessarily have to print and retain hard copies of your tax returns – electronic documents are fine as long as you will be able to access them quickly should you need them.
If you fail to keep copies of your tax returns, you can still access them by asking the IRS for transcripts. It is best to keep your own records, and doing so will make your life a lot easier.
As with the tax returns themselves, it is generally a good idea to keep your W2 forms for a minimum of three years. This will provide you with the documentation you need should the IRS find a discrepancy between the amount of income you reported to the agency and the figures your employer provided.
It is also a good idea to retain at least your year-end pay stubs, not only to help reconcile them with the W2 forms but also for other forms of income documentation. If you are applying for a mortgage, for instance, the lender may ask to see several years worth of tax returns, pay stubs and other income documents, and having them on hand will make the application process faster and easier.
The IRS looks at all of the income you report when you complete and submit your tax returns, but the agency does not just take your word for the accuracy of those figures. Instead the IRS uses sophisticated matching programs to compare the amount of income you reported from various sources with what they receive from third party sources.
Those third party sources could include your bank and credit union, your brokerage firms and mutual fund companies and any other places that provide you with income. It is therefore a good idea to hold onto any income related forms you receive for at least three years, and possibly longer if you run your own business or earn income from gig work or freelancing.
Once again, these income documents can do double duty, serving as backup if the IRS questions the numbers on your tax return but also giving you the information lenders and others might need down the road. If you store these documents electronically you will not even need to worry about buying a file cabinet, so there is really no reason to not keep them around.
Filing taxes can be a stressful experience, but the difficulty does not end when you click send on your e-filed tax return. Even after that return has been filed and accepted, the IRS could still question or challenge your numbers, and that is why it is so important to retain the backup documentation until the challenge window has passed. Now that you know what to retain and for how long, you can rest a little easier when tax time rolls around.
If you do run into tax trouble or the IRS states you owe back taxes, reach out to our tax resolution firm and we’ll schedule a free, no-obligation confidential consultation to explain your options in full to permanently resolve your tax problem. [https://calendly.com/premiersmlbus/consult]